INCOME TAX OFFICER WARD-2(1), ASANSOL vs. M/S GHOSH & CHAKRABORTY TRANSPORT, BURDWAN

ORDER Per Shri M. Balaganesh, AM:

This appeal by revenue and Cross Objection by assessee are arising out of order of CIT(A), Asansol vide appeal No. 221/CIT(A)/Asl/W-2(1)/Asl/10-11 dated 13.08.2013. Assessment was framed by ITO, Ward-2(1), Asansol u/s. 143(3) of the Income tax Act, 1961 (hereinafter referred to as the “Act”) for AY 2008-09 vide his order dated 28.12.2010. Both the appeal and the cross objection are taken together for the sake of convenience.

2.1. The brief facts of this issue is that the assessee is a partnership firm engaged in the business of Transport Contract. During the course of assessment proceedings, the ld AO observed that the assessee had made certain payments in excess of Rs. 20,000/- by cash / bearer cheques to various parties to the tune of Rs. 33,92,219/- in violation of provisions of CO No.140/K/2013 Ghosh & Chakraborty Transport AY 2008-09 section 40A(3) of the Act . The assessee was directed to produce the cash book by the ld AO which was not complied with and accordingly the ld AO disallowed the sum of Rs. 33,92,219/- u/s 40A(3) of the Act. On first appeal, the ld CITA observed from the cash book , there was no payment exceeding Rs. 20,000/- made by the assessee and hence there is no violation of provisions of section 40A(3) of the Act and deleted the disallowance. Aggrieved, the revenue is in appeal before us on the following ground no.1:-

1. That the Ld. CIT(A), Asansol has erred in law and on facts by allowing the relief of Rs.33,92,219/-, disallowances made by the AO u/s. 40A(3).”

2.2. The ld DR argued that the cash book was produced by the assessee only before the ld CITA and the ld CITA had passed the order without calling for a remand report from the ld AO on this issue and accordingly prayed for set aside of this issue to the file of the ld AO for verification from his side. In response to this, the ld AR argued that the cash book was also produced before the ld AO from time to time along with other documents which had been endorsed by the ld AO in his assessment order in para 4 page 2 as below:- “The A/R produced Audited Balance Sheet for A.Y. 2008-09, TDS certificates, Ledger regarding expenses debited in the P&L Account bills and vouchers in support of expenses incurred, bank statements from time to time during the conduct of this Quasi Judicial proceedings, all of which were examined and verified either fully or on test check basis.”

Accordingly, he argued that the cash book was also produced before the ld AO who did not properly appreciate the contents thereon at the time of assessment proceedings. The same cash book was also produced before the ld CITA who on verification of the same had come to a conscious conclusion that there was no violation of section 40A(3) of the Act.

2.3. We have heard the rival submissions. We find that the only issue which is relevant for disposal of this issue is furnishing of cash book before the ld AO which is disputed by the ld AO. We deem it fit and appropriate, in the facts and circumstances of the case, in the interest of justice and fair play, to set aside this issue to the file of the ld AO, to decide this issue afresh, in accordance with law, after verification of the cash book of the assessee. The assessee is also directed to file the cash book before the ld AO. Accordingly, the ground no. 1 raised by the revenue is allowed for statistical purposes.

CO No.140/K/2013 Ghosh & Chakraborty Transport AY 2008-09 3.1. During the course of hearing, the ld DR stated that this ground is not pressed by the revenue. Accordingly, the ground no. 2 raised by the revenue is dismissed as not pressed.

CO No. 140/Kol/2013 – Cross objections of the assessee

4.1. The brief facts of this issue is that the ld AO observed that the in the balance sheet, the assessee firm had shown Rs. 11,64,892/- as Transport charges payable. On obtaining the names and addresses of the transporters , the ld AO issued notices u/s 133(6) of the Act to verify the veracity of the said claim. He observed that wherever the notices were served, no replies were filed by the parties and in most of the cases , the notices returned back. Accordingly, the ld AO proceeded to treat the sum of Rs. 10,59,492/- as bogus liability and brought the same to tax as income of the assessee. In first appeal, the assessee stated that the expenditures were incurred on truck owners who were coming from different places to work and after completion of the job they moved to other places and hence could not trace those parties. The ld CITA observed that physical production of truck drivers may be difficult but corresponding reliable bills proving authenticity should be produced by the assessee which was not done in the instant case. Accordingly , he upheld the addition made by the ld AO. Aggrieved, the assessee had preferred the following ground in his cross objections:-

1. For that on the facts of the case the Ld. CIT(A) was not justified in sustaining the addition of Rs.10,59,492/- on account of outstanding transport charges payable, when all payments made to transporters are verifiable against respective PAN and supported by TDS, and the addition may please be deleted.”

4.2. The ld AR referred to the Paper Book filed by him comprising of Balance Sheet as on 31.3.2008 wherein Sundry Debtors (Bills Receivable) were shown at Rs. 17,25,844/- and tried to justify the fact of transport charges lying outstanding as payable in the sum of Rs. 10,59,492/-. Since monies could not be recovered from its sundry debtors as on 31.3.2008, the same could not be paid to truck drivers as on 31.3.2008. He argued that the ld AO had accepted the payment made to truck drivers / owners during the year as genuine expenditure and it is highly unfair to treat the amounts payable as a bogus liability and making addition

CO No.140/K/2013 Ghosh & Chakraborty Transport AY 2008-09 thereon. He stated that the entire liabilities were paid by the assessee in the next year. In response to this, the ld DR vehemently supported the orders of the lower authorities.

4.3. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee comprising of balance sheets as on 31.3.2008 (pages 8 to 22) ; various ledger accounts of the assessee (pages 23 to 45) and cash book of the assessee (pages 46 to 82). The facts stated hereinabove remain undisputed and hence the same are not reiterated for the sake of brevity. We find in the facts and circumstances that the payments were made to truck drivers / owners towards transport charges and the ld AO had also accepted the expenditure wherever payments were made by the assessee before the end of the previous year but had only disallowed the amounts payable as on 31.3.2008. The ld AR stated that the said dues were also discharged in the subsequent year immediately on recovery of its sundry debtors dues. In these facts and circumstances, we deem it fit and appropriate, in the interest of justice and fair play, to set aside this issue to the file of the ld AO , with a direction to verify the subsequent payments made by the assessee towards this transport charges payable and decide the issue accordingly. The assessee is directed to produce necessary evidences in this regard to the ld AO. Hence, the ground No. 1 raised in the cross objection of the assessee is allowed for statistical purposes.